Monday, November 12, 2012

Is this the new, post-election normal, or, is there just so much uncertainty in the markets that half the crowd is buying while the other half is selling?

One thing is for certain: stocks have gone nowhere - eventually settling roughly where they started - for the second session in a row. This kind of directionless pattern leaves everybody shaking their collective heads, and, on a day like today - in which bond markets were closed in observance of Veteran's Day - it's assumed that nobody made much money, including the brokerages, because volume was so low.

Currently, there is a dearth of news and the markets seem to be waiting for some kind of resolutions in Washington over the issue of the "fiscal cliff," but if Wall Street waits until the politicians do a deal, it could be a long wait indeed.

With no catalyst to the upside and stocks sitting pretty much under resistance (the Dow and NASDAQ under their 200-day moving averages, S&P sitting right on its), there's a good probability that another leg downward could be forced by some outside event - a black swan, so to speak - though nobody has any idea where or what such an event would look like.

What is a little bit odd about the trading over the past two days is that it's so close to options expiry on Friday. One would normally be expecting a ramp-up, and, that could come on Tuesday or Wednesday, regardless of what anyone thinks, hopes or believes. Wall Street is still run on the dual emotions of greed and fear, and if there's no fear (the vix was well down today), greed will overtake it and move stoks higher. Traders have to trade, and they'd rather be advising clients to get in now, off the recent move lower, than be selling on their own or their clients' behalves.

The odd trading pattern that was evident on all the major exchanges saw the averages up for the first half hour, slide slowly to the lows of the day just after 11:00 am, bottom, and then race to highs of the day in a straight line between 12:15 and 1:15 pm.

That was all she wrote, however, as stocks took a stair-step pattern back to the break even line, making the day look like a day-trader's nightmare, which it may well have been.

There was virtually nothing notable to report in either Europe or the US, though Japan's economy shrank by 3.5% in the third quarter, further evidence of the global slowdown. On the other side of the ledger, China announced strong exports, but their data has been proven time and again to be often more fiction than fact.

China may well have increased exports recently, but to whom, and why? Global demand has been flat to declining, so maybe China has rediscovered McDonald's secret sauce to fuel its success.

None of that mattered a whit in the US or Europe, which was also lackluster.

Tomorrow may be different, but, it may be more of the same. That's just the environment we have.

A couple of indications may be worthwhile in the advance-decline line, which was marginally negative, and the fat that new lows outpaced new highs for the fourth day in a row, something of a trend developing, maybe.